Unemployment Insurance Fraud and Optimal Monitoring

David Fuller, B Ravikumar and Yuzhe Zhang ()

American Economic Journal: Macroeconomics, 2015, vol. 7, issue 2, 249-90

Abstract: An important incentive problem for the design of unemployment insurance is the fraudulent collection of unemployment benefits by workers who are gainfully employed. We show how to efficiently use a combination of tax/subsidy and monitoring to prevent such fraud. The optimal policy monitors the unemployed at fixed intervals. Employment tax is nonmonotonic: it increases between verifications but decreases after a verification. Unemployment benefits are relatively flat between verifications but decrease sharply after a verification. Our quantitative analysis suggests that the optimal monitoring cost is 60 percent of the cost in the current US system. (JEL D82, H24, J64, J65)

JEL-codes: D82 H24 J64 J65 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/mac.20130255
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Unemployment Insurance Fraud and Optimal Monitoring (2014)
Working Paper: Unemployment insurance fraud and optimal monitoring (2012)
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